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OPINION

Editorial: Legislature quietly passes big taxpayer giveaway

Gov. Terry Branstad mingles during a reception for Casey Blake who will receive the 2016 Robert D. Ray Pillar of Character Award on Friday, April 15, 2016, at the Prairie Meadows Event Center in Altoona. The Award is presented annually to an individual who consistently demonstrates good character as a public role model.(Photo: Brian Powers/The Register)Buy Photo

On one single day last October, the political action committee of Iowa's nursing home industry made 83 campaign contributions to various statehouse candidates.

Several weeks later, on a Wednesday morning in late December, this same PAC hosted a political fundraiser for Gov. Terry Branstad at the West Des Moines office of the Iowa Health Care Association. Forty-five checks, totaling $59,825, from nursing home executives and lobbyists were delivered to the Governor Branstad Committee that day. It was a very successful event, particularly since the governor wasn’t even running for office.

Last week, immediately after the 2016 legislative session ended, the association alerted its members that it had succeeded in winning lawmakers' approval of a new program that’s expected to generate a cash windfall for nursing homes at the expense of federal taxpayers.

Assuming this legislation — which generated no public debate at the statehouse — is signed into law by the governor and approved by the federal government, nursing homes and hospitals in Iowa could collect an additional $206 million annually from Medicaid.

They would do so through a complex series of machinations in which the homes give their state license to a county hospital but maintain their ownership and management structure. The license transfer is a bit of sophistry designed to make it appear the homes are run by hospitals. That’s desirable because Medicaid pays county hospitals and their affiliated nursing homes more than it does other nursing homes.

Under this new “supplemental payment program,” the hospitals and homes would split the new Medicaid revenue, and the homes could use their share to pay for things like construction and renovation.

Even though Medicaid is supposed to be funded by both the state and federal governments, this scheme won’t have any impact on Iowa’s state budget. That’s because the hospitals will reimburse the state for its share of the Medicaid expense, while keeping the much larger portion of Medicaid money that comes from the feds.

If that sounds like a scam, it’s because it is.

Yes, it is legal. In fact, it is already being used in Indiana and a few other states. But it’s based on the elaborately constructed fiction that these homes are run by county hospitals. The deceit is then compounded by the false claim that because the state is spending more on Medicaid, it’s entitled to additional, matching dollars from the feds.

This is only the latest in a series of funding gimmicks used by the states to draw down more federal Medicaid money. While it’s true these contrivances don’t cost the state treasuries anything, they most definitely cost the taxpayers — in Iowa and elsewhere — a fortune in federal taxes.

Consider Indiana, where this subterfuge cost a staggering $836 million last year. One Indiana hospital operator has held the license for five dozen nursing homes and collected an extra $100 million per year in the process. The Indianapolis Business Journal reports that many of Indiana’s nursing homes have doubled their profit margins through this ruse.

Here in Iowa, the state's Department of Human Services, which oversees the Medicaid, says it doesn’t know how many Iowa nursing homes might participate in the program or what the program might cost the federal treasury.

DHS may be in the dark, but industry lobbyists are not. The Iowa Health Care Association says 389 of 404 homes are "likely to participate" in the program, at a first-year cost of $206 million.

Rep. Dave Heaton, a Mount Pleasant Republican who floor-managed the bill, says he wasn’t aware of the $206 million price tag. He said he and other lawmakers weren't concerned about the program’s cost to federal taxpayers. “Since there was no state money involved, we just didn’t deal with that,” he said.

Asked why the program was approved with no virtually public debate, Heaton said the measure was backed by the Iowa Health Care Association — Heaton’s biggest campaign contributor — and no one spoke in opposition to it.

Iowa’s nursing homes may be deserving of additional Medicaid money, but it shouldn’t be delivered through sleight of hand with license swaps and fictitious claims of increased state spending. And it certainly shouldn’t be tacked onto the end of a 100-page appropriations bill and approved with no public debate.

Each year, the average Iowan pays $9,485 in federal taxes. It’s flat-out irresponsible for legislators to green-light the transfer of hundreds of millions of dollars from Medicaid to the coffers of private industry without even inquiring as to the cost to taxpayers.

This “supplemental payment program” is a taxpayer-funded giveaway of epic proportions, and it was created for the express purpose of circumventing federal Medicaid regulations.

It should never have been approved. And the federal Centers for Medicare and Medicaid Services should reject it.